Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

EA-2F > §436 - Benefit Restrictions > Flashcards

§436 - Benefit Restrictions Flashcards

1
Q

Which plans do section 436 apply to?

A

All non-multiemployer plans.

Note: Apply 436 as to multiple employer plans as if each employer maintained separate plan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

FTAP General Definition

A

FTAP1 = (AVA - FSCB - PB) / FT

FTAP2 = AVA / FT

If FTAP2 >= 100%, use FTAP2 Else FTAP1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

AFTAP General Definition

A

Use the calculated FTAP, but add NHCE AP from prior two years to the denominator and numerator

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

T/F Although you certify AFTAP later in the year, you use the FT, NHAP, AVA, and credit balances as of the valuation date (1/1 usually).

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Does Section 436 apply to new plans?

What is the definition of a new plan?

A
  1. Only 436(d) “accelerated benefit payments” applies for first 5 years of a new plan
  2. a new plan is a plan where none of the participants benefited in another plan sponsored by the employer in the last 5 years
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the exception to section 436 for terminated plans?

A

All restrictions still apply, but can ignore to carry out process of terminating plan - i.e. Annuity purchase is allowed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Under section 436 when determining credit balance forfeitures, what is the definition of a CBA?

A
  1. 25% of participants in plan are CBA
  2. 50% of benefiting employees are CBA

Either case - benefit levels must be specified under a collective bargaining agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the definition of a prohibited payment under section 436?

Are annuity purchases and mandatory cashout exempt from this definition?

A

A prohibited payment is anything faster than an SLA.

Annuity Purchases are not exempt, but mandatory cash-outs are exempt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

436 Measurement Date Definition

A

Date which starts/stops restrictions under 436I.e. when you make a 436 contribution, forfeit PFB/FSCB, 1/1, 4/1, AFTAP cert date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

When must 436 contributions be made?

A

During the plan year you are avoiding the 436 restrictions (before benefit restrictions are lifted)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

UCEB Definition

UCEB = Unpredictable Contingent Event Benefit

A

a benefit payable due to event other than

  1. age
  2. service
  3. compensation
  4. death
  5. disability

An example would be a plant shutdown

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the restrictions imposed by section 436 on UCEBs?

How can you avoid the restrictions?

A

Can’t pay out UCEB if AFTAP is below 60% (after UCEB), unless plan sponsor makes a contribution of:

  1. If AFTAP (before UCEB) < 60%, then the cost of UCEB
  2. If AFTAP (before UCEB) >= 60% amount to get AFTAP back to 60%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the restriction imposed by section 436 on amendments increasing current liability?

How can you avoid those restrictions?

A

Can’t adopt amendment if AFTAP is below 80% (after amendment), unless make a contribution of:

  1. If AFTAP (before amendment) < 80%, then the cost of amendment
  2. If AFTAP (before amendment) >= 80% amount to get AFTAP back to 80%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the exception to the restriction on amendments increasing liabilities in section 436?

A

If benefit is not based on compensation, then plan sponsor may provide benefit increases up to the average increase in these ptp’s compensation from last amendment to this amendment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the limitations on accelerated benefit distributions under section 436(d)?

How can you avoid these restrictions?

A
  1. if AFTAP < 60%, then no prohibited payments (i.e. fop faster than SLA)
  2. if AFTAP between 60% and 80% then can’t exceed lesser of
  3. 50% of what could have been paid
  4. PBGC maximum guaranteed benefit

Cannot use 436 contributions to avoid these restrictions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Does 436(d) restrictions apply to a plan sponsor in bankruptcy?

A

Yes, they are even more strict.

Plan Sponsor cannot pay any prohibited payment while less than 100% AFTAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What type of plans are exempt from 436(d) accelerated benefit distributions?

A

Plans frozen before 9/1/2005

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

A participant takes a LS for half his benefit when the plan has an AFTAP of 70%. The plan has an AFTAP of 71% in the following year. Can he take another LS?

A

No a participant/bene can only take 1 prohibited payment during a period where the plan has a accelerated benefit restrictions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

T/F A LS of mandatory employee contributions or a Social Security Leveling features is exempt of section 436(d).

A

False

20
Q

T/F a 436 contribution can be used to avoid section 436(d) restrictions (accelerated benefit payments).

A

False

21
Q

T/F Deemed reductions for a CBA plan still occur for an amendment that increase future accruals.

A

False - Exception for an amendment that doesn’t increase current accrued liability

22
Q

What are the limitations on benefit accruals under section 436(e)?

How can you avoid 436(e) restrictions?

A

If AFTAP < 60%, cannot provide benefit accruals.

If they pay a 436 contribution to get back up to 60% then can provide accruals again.

23
Q

T/F 436 contributions must be cash.

A

False

You could make a 436 contribution by using bonds with acceptable surety, or US Bonds (<3 Yrs Maturity) held in escrow by bank. These securities only increases assets for 436 purposes.

24
Q

T/F PFB and FSCB can be used to pay a 436 contribution.

A

False

But you may have deemed reductions of the PFB/FSCB that allow you to avoid restrictions

25
Q

When do the deemed reduction of funding balances under section 436 apply?

A
  1. If any restrictions under 436 apply to a CBA plan, then plan is deemed to forfeit Credit Balance IFF it would get rid of a restriction
  2. If 436(d), accelerated benefit payments, apply to a Non-CBA plan then the plan is deemed to forfeit Credit Balance IFF it would get rid of accelerated benefit restrictions
26
Q

How are credit balances reduced using a presumed AFTAP?

A
  1. Use the current AVA (excluding receivable contributions not made by determination date) - Credit Balances and presumed AFTAP to back into the Presumed Funding Target.
  2. Reduce CB if would push the (AVA - CB)/Presumed FT over either 60% or 80% threshold
27
Q

T/F If an exam question doesn’t specify CBA or possible forms of payments, you can be deemed to forfeit credit balances.

A

False - Assume SLA only and non-CBA, so no restriction apply under 436

28
Q

T/F A plan is presumed to have AFTAP below 60%. They are deemed to forfeit credit balances.

A

False - it would not remove benefit limitations, so they are not deemed to forfeit CBs

29
Q

T/F A plan can make a 436 contribution to avoid forfeiting credit balance under 436

A

False- Deemed Reduction in CB are done w/o regard to 436 contributions

30
Q

What are AFTAPs presumed to be before the actuary certifies the current year’s AFTAP?

A
  1. Before 4/1 Assume last year’s AFTAP until 4/1
  2. 4/1 to 10/1 Assume last years AFTAP - 10% if within 10% of a limitation
  3. After 10/1 Then assume < 60%
31
Q

If you over-contribute for 430 based on a presumed AFTAP, what happens?

A

You can recharacterize the excess towards MRC.

32
Q

If you fail to certify AFTAP, but have AFTAP of 100% in the previous year, when do benefit accruals stop under 436?

A

at 10/1

33
Q

How do you determine the amt for a 436 contribution if the EIR has not be determined yet?

A

Use the HIGHEST of the 3 segment rates. If the EIR is later found to be smaller, the excess is reclassified towards MRC.

34
Q

A 436 contribution to remove restrictions in 2010 is a 2010 contribution. Do you use EIR from 2009, 2010 ro 2011?

A

2010 - use the rates from the plan year that the contribution was made for

35
Q

What’s the difference between a 436 contribution and a normal contribution?

A
  1. It is used to remove benefit restrictions
  2. Cannot be used towards MRC/Cannot increase credit balances
36
Q

Will contributions made before the certification date increase the AFTAP?

A

Only if they were made for PRIOR year

37
Q

If the EA certifies the AFTAP after the beginning of 10th month, when is AFTAP used?

A

Won’t take effect until beginning of next year when the AFTAP is presumed to be equal to the prior year.

38
Q

How are receivables included in an AFTAP?

A

Only receivable contributions made before the certification date can be included. Discounted back to valuation date using the prior year’s effective interest rate.

39
Q

How does a range certification work?

A

You can specify the plan is in a band (<60%, 60%-80%, 80%-100%, >100%)

For all purposes, the AFTAP is assumed to be at the bottom of the range

Must provide a specifc certification by 12/31, else assumed < 60% at 10/1

40
Q

T/F If you give a range certification of 60-80 and then certify a specific value of 72% on 11/1 the AFTAP drops below 60%.

A

False

If you give a range cert, you have until the end of the year to certify specific value.

41
Q

If you give a range certification on 9/1, but fail to have a specific value by Year End, when is AFTAP presumed to be <60%?

A

At 10/1

42
Q

What happens if range certification is wrong?

A

Plan disqualification

I.e. it would be retroactively applied which would be a problem…

43
Q

If plan is under 80% funded and at risk do you contributed based on increase in FT or at-risk FT?

What about if the plan is above 80% before the amendment and falls below 80% because of amendment?

A
  1. at-risk FT
  2. Not at-risk FT
44
Q

How is the 430 Funding Target and Normal Cost affected by the restrictions in 436(d)?

A
  1. If benefit commenced and affected then must reflect the restrictions
  2. Else ignore the 436(d) restrictions
45
Q

How is the 430 Funding Target and Normal Cost affected by the restrictions in 436(e)?

A
  1. Ignore 436(e) for Target Normal Cost
  2. If plan document automatically restore accruals and restricted less than 12 months then ignore 436(e), else reflect 436(e) in funding target

EA-2F (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions